The state of Colorado and nation are reeling badly, with no real solutions in sight. The state budget faces a $3 billion shortfall. The state’s emergency funds, limited by TABOR, aren’t nearly enough to keep the state running. That is our harsh reality.
Our ability to control COVID-19 is limited. We can do far more to stop the economic collapse, which otherwise could last for decades. The solution is incredibly simple: create a state of Colorado Public Bank and borrow from the Federal Reserve at its new discount window interest rate of 0.25%. This could help generate many low-interest loans at 1-3% for immediate economic relief. After three months, the Fed loans can be rolled over daily. The Fed also recently eliminated reserve requirements and relaxed capital requirements. (See article by Ellen Brown, author of The Public Bank Solution, showing how the new Fed rules empower banks in this crisis.) Banks actually create new money out of nothing when they make loans. Why give that enormous power and the income away to major banks to invest elsewhere for their shareholders’ benefit rather keep the loans and income here?
Colorado could move its deposits and investments from Wall Street banks to its own bank. It could convert the Colorado Housing and Finance Authority’s and its other lending funds to bank capital. Or it could use revenue bonds, investment pools, or say 3-5% of PERA investments for capital and provide PERA a higher and safer return than its hedge fund investments. The bank could lend 10 times its capital or more.
Public banks provide major new income without raising taxes and could sometimes enable 
tax reductions. Colorado’s Office of Legislative Legal Services has issued a legal opinion that a public bank as a self-sustaining “TABOR enterprise” would probably not violate Colorado’s constitution.
A former state banking director says a public bank could be started in a month. The public bank could make loans in partnership with local community banks to build affordable housing, prevent foreclosures and takeover of property by real estate investors who invariably raise the rent. It could help struggling businesses, expand COVID-19-related health services, finance infrastructure, and refinance student loans. These actions would save tens of millions on the cost of interest annually which averages nearly half the cost of a loan and up to 77% of the cost of affordable housing.
The public bank would be managed by professional bankers, would be transparent and accountable, and carefully operated to prevent conflicts of interest and political or corporate interference. Public banks have very low overhead — no ads, branches or ATMs, no humongous salaries, no dividends or speculative loans. They can be very profitable. The Bank of North Dakota (BND) has averaged 17% profit per year over the last 16 years, much higher than Wall Street.
Last October, California enacted a bill authorizing cities and counties to obtain public bank charters, and in November, New Jersey’s Gov. Murphy issued an executive order establishing a board to implement a public bank. Other states are moving forward.
In 2019, the Bank of North Dakota had $4.5 billion in outstanding loans in a state with 762,062 people. In the 2008 crash, BND increased lending slightly to offset the decline, making North Dakota the only state to avoid recession and instead achieve record profit each year. Some argue it was North Dakota’s oil, but Montana and Alaska had as much oil and still had budget deficits and high unemployment. North Dakota’s fracking income did not kick in until 2010.
Alberta, Canada, has operated the largest public bank in North America — ATB Financial, since 1938. With a population of 4.4 million, its bank has $47 billion in loans outstanding, a bulwark for its economy.
A comparable bank for Colorado’s 5.76 million population could generate $61 billion in loans, enough to reverse the recession. The multiplier effect augments the benefits. In this crisis, our governor has issued bold executive orders demonstrating his leadership. This is an opportune time to again demonstrate outstanding leadership. Colorado could recover fully in 12-24 months and be a model for the country. Gov. Polis and legislative leaders, we need a state public bank today.
Correction: An earlier version of this post said that a Colorado public bank could refinance the state’s bonds. Colorado’s constitution prohibits the state from contracting debt.
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A state bank could also offer services to “unbanked” populations, both on the depositor side (marijuana businesses, or perhaps enhanced access to banking by Colorado’s youth) and on the borrower side (there are some existing microlending programs, but not throughout the entire state).
The only possible opposition to a state public bank, or public banks for cities and counties, would be the big Wall St. banks who are currently making money off of our money and charging us big fees in the process, a double loss for us. Even our local, independents banks and savings in loans would benefit, as they would be partners with our public banks at the retail level. In the aftermath of the last economic collapse, 2008-2009, local financial institutions all over the country failed by the hundreds. Not in North Dakota, where not a single local bank failed. What’s more, ND had the lowest rate of home mortgage foreclosures, because the state public bank partnered with the local banks and worked with mortgage holders to keep them in their homes, leading to more stable communities. The big five banks also don’t care about issuing loans to small businesses, a sector hit hard by COVID stay at home orders. In 2015, Wells Fargo issued exactly 5 small business loans in the entire state of New Jersey. Public banks not only generate, new, non-tax revenue, but they strengthen communities, and, by supporting small businesses, create jobs. NJ’s Governor Murphy is a former Goldman Sachs president of Southeast Asia and had a 23-year career with the company. Who would know better that a Goldman Sachs exec where a state should put its money? I hope Governor Polis follows his lead and establishes a state public bank for Colorado through executive order so we can get our money working for us soon!